Value of a business

[inthemoment]

I'm trying to determine the value of a business for sale.
Business has commercial accounts totaling $14k per month. $20k of equiment including trucks and trailers. The P&L states 3x more gross revenue above the annualized contract amounts, from additional install work.

What is a good rule of thumb to determine a purchase price or sale price?
Are the contracts worth an annualized amount or a monthly amount?
Equipment is in good shape but is used so how do I determine value on that?

[Scagg Mann]

We are also buying a business. If there is contracts it may be worth a little more. But We're buying one at one months gross income potential and paying around trade in value on equipment. Also, we are not paying everything up front. I want there to buy a financial incentive for the existing company to make sure we get the accounts and have incentive for a smooth transition. We are buying 50% down which is about the value of the company and then 2 additional payments depending on number of accounts and their gross over a few months. If they are confident you will get the accounts then they should be okay with paying it out based on gross income. And it is difficult or impossible to get financed from a bank. They look at those accounts on paper and say, just that, its just paper as of now.
Good luck

[inthemoment]

We are also buying a business. If there is contracts it may be worth a little more. But We're buying one at one months gross income potential and paying around trade in value on equipment. Also, we are not paying everything up front. I want there to buy a financial incentive for the existing company to make sure we get the accounts and have incentive for a smooth transition. We are buying 50% down which is about the value of the company and then 2 additional payments depending on number of accounts and their gross over a few months. If they are confident you will get the accounts then they should be okay with paying it out based on gross income. And it is difficult or impossible to get financed from a bank. They look at those accounts on paper and say, just that, its just paper as of now.
Good luck

Thank you. So on this one, there are contracts. Everything is under contract. Some have already been signed and run into 2009 and expire in the fall. Some will need to be renewed in the spring. Of course I'm being told they are secure but......? I am aware of the financing difficulties and will not be using the bank. The owner is interested in carrying a % of the purchase price, how creative should I get with this?

[gringo gardener]

P&L statements can say anything you want ... you need to see what his taxman sent to the gov't for the past three years and THIS is the actual number you base your price on